India’s scams and corruption are perennially ubiquitous – they keep recurring time and again. There is hardly a month that goes unnoticed without any major scam breaking out. It is not that there isn’t any scam elsewhere, but barring some sub-Saharan and Asian rogue states ruled by the junta, the scale and magnitude of Indian scams have outperformed every other nation by an unprecedented margin of frequency and scale. Typically, a scam exposé starts off with media frenzy and then gets lost into thin air! The typical Indian middle class’ short memories, inevitably brushes the scam off, and then the judiciary typically bails out the accused, and everything is business as usual. Even though media spotlight continues on the case for a while, the same mostly focuses on the economic aspect of it, largely ignoring the enormous social impact. Mostly, the multi-million dollar scams that prop up every now and then have huge negative externalities both at the regional and national level.

Let me talk a little about the recent scam, which has been rocking the nation – Coalgate! Coal mining – the lifeline of thermal power that constitutes around 66 per cent of installed capacities in power generation in India – is very inefficiently run, and I’m being graciously modest when I say that. The sector is marred by massive pilferage and corruption with open disregard to environment and conservation. However, there are many other serious ground concerns that have been missed amidst the entire current hullabaloo. To start with, the mandatory regulation of open cast and underground mining requirement is flouted openly, causing health hazards on account of environmental degradation per se. The corruption level is beyond one’s wildest imagination. Sample this: even the sand purchased to fill the old mines is being sold in the open markets for petty gains!

There have been waves of protests in most of the coal mining states – particularly socially conscious Maharashtra – against pollution, environment hazards, and land acquisition... but nothing much was done. Land procurement is done by the government, and also by the private coal mining companies, which have very little respect for the laws, and who have very little good-faith negotiations with the land owners! And mind you, these activities are on since decades, even before any coal scam was discovered. Read More....

I was watching a movie in the first floor of our house that fateful afternoon of '94 when that call came and changed our lives forever. It was my mother who had called from the ground floor of our house to inform me through her uncontrollable tears that she had just then received a call that my younger brother had died in a road accident. I rushed down hoping against hope that it was someone else. My dad was sure it wouldn't be someone else – as I drove our car frantically towards Gurgaon where the accident had happened – and advised me to drive slowly. He had done his maximum possible to see to it that we never developed a fascination for motorbikes. An avid reader of about a dozen papers everyday, my father was definite that a motorbike was a sure-shot route to disaster on Indian roads. So the soonest he could, he bought a car for us. I still remember that day in 1993, after he had bought a fifth-hand 1977 model Toyota, he entered the house, lay down on the bed in a relaxed manner and told my grandmother, “I have put a "kavach" (a shield) around my children today.” Unfortunately, that was not to be.

So, that afternoon, did my brother really let my father down by taking a ride on a two-wheeler from our institute’s campus to the highway to have lunch? No. I believe every 20-year-old at times takes his own decision and thinks that this much seems quite fine a risk. We all have the right to go out on the road and come back alive. It’s India’s pathetic road safety that let him down. We are a country of road killers. The highest number of road deaths in the world happens in India. If it were America, chances are fifty times more that my brother would have been alive.

While with only a mere 12 million vehicles, we have about 114,000 deaths on Indian roads, with about 250 million plus cars in the USA, they have only 41,000 road accident fatalities per year. That is, in India for every 100 cars we have one road death; in USA, there’s one road death for every 5,000 cars! And how does this difference take place? Is it because there people don't drink? Well, the daily normal alcohol consumption per capita is far higher in the West, especially among the youth – which is involved in the maximum number of road accidents. Is it because people in the West don't drive fast? Well, the average speed limits in developed nations are far higher than those in India. And it is in developed nations that more youths have access to vehicles on the road and ergo tend to be more reckless; then how is it that the West manages to systematically bring their accident numbers down to such abysmal lows, while we aren't even bothered? Or is it that only the 26/11 deaths should be considered as deaths but thousands of more preventable deaths happening in every other family around us are not deaths but God’s sweet will? Can you fathom this, that as a nation, we lose $20 billion annually to road accidents, enough money to do away with 50% of our country's malnutrition problem? Read More....

The day our railway minister was forced to resign, a train rammed into a van killing 16 people and injuring many more! What looked like a coincidence, is not in reality one! For had he resigned almost on any other day, a similar news would have been there in any case – such is the sorry state of Indian Railways. Out of the 33,000 odd railway crossings in India, a shameful 15,000 or so are unmanned, due to which about 33% of the accidents and a whopping 60-70% of the railway deaths happen!!! Yes, that is the morbid statistics! To man a railway crossing, all we require are two men on a twelve-hour shift each, which means a salary of 1.5 lac rupees per man, multiplied by 2 per crossing, multiplied by 15000 (number of unmanned crossings); and this equates to a mere 450 crore rupees per annum, an amount that our politicians mystically do not feel the need to budget, consequently killing thousands every year, an ignominious onus that our railway ministry must directly take. While we apparently do not have this amount of 450 crore rupees, our politicians have shamefully not hiked the rail fares for ten years at a stretch, while every rail passenger whose fare should have been hiked has got salary increases year on year as well as various pay commission windfalls. The ostensible reason forwarded to us is that the aam aadmi will get penalized. Frankly, the reason itself is hogwash. The man to whom an annual raise in railway fare would hurt – the real aam aadmi in India – unfortunately doesn’t travel long distance by train... He is at the most a short distance traveller. Without any argument, the hikes are a must and the lack of it is almost criminal, especially when we have such massive safety issues in the plying of trains.

If just inflation would have been adjusted into fares these ten long years – not having done even that, I repeat, is almost criminal – then the railways would have been richer by 25000 crore rupees per year! Compare that now to the meagre 450 crore rupees that is required to phenomenally reduce the 60-70% deaths which occur on railway crossings! The money thus earned would have not only taken care of all our safety related expenses but also the pathetic speed of growth of Indian Railways since the British left India (for comparison’s sake, China every year adds five times more new tracks than India).

In most of the budget shows that I attended this year, I was asked that if the solution was so simple, then why had the ministry not already increased the fares? My answer was that with money, comes the responsibility of spending it. Our politicians are literally so visionless and irresponsible, one worse than the other, that they have simply chosen to not undertake such a clearly straightforward solution. And of course, it helps their jaundiced political posturing of being ‘highly concerned’ about the aam aadmi; all this while actually murdering the aam aadmi in cold blood – a common trait of the Indian political class, top to bottom. They claim that 97% of Indians travel ‘lower class’. The fact is that 97% of railway seats are lower class. None of this actually means that the poor are traveling long distance via trains here in India. Read More....

First of all, congratulations to our Chief Election Commissioner Dr. Quraishi for yet again managing the elections with the least reports of rigging; congratulations also to Akhilesh for becoming an icon overnight for the Indian youth through sheer hard work. I shall write on him very soon! This time, I want to write on something that is spoken about every time that elections are held anywhere in India – the question of election time funding. Of course, it’s shameful the way black money dominates election funding in India. But then, if you thought American Presidential elections – the nomination fight for which is underway currently in the USA – are clean, then here are some facts which will make you think again!Actually, throughout history, elections have never been democratic in the true sense with money power significantly dominating the outcome instead of ability, one way or the other. There has been rarely an election where power-variables have not played their role. Almost all elections around the world are manipulated to one extent or the other with money, power, rigging, hacking or even fixing. The upcoming American Presidential election is no exception either. Clearly a strange paradox – on one hand, the American election system is considered one of the most transparent electoral processes; on the other, this very election rarely has been fair to its masses.

Unlike in India, where election funding is mostly clandestine and is funded primarily with black money, the US electoral system has been legally endowed with formal procedures to direct cash flows into the system, especially for election campaigns. On hindsight, it might appear that therefore, the elections held in the US would be quite transparent and money would play a moderate role in deciding the final winner. Unfortunately, the fact is that irrespective of how transparent the election process might be, money power is quintessential for any political party or any Presidential candidate to perform well in the elections – that in itself undermines the true essence of democracy! Today, the underlined fact is that globally, it is money that makes one win the elections, (and this has been proved through various studies). Period!

US election laws allow Political Action Committees (PACs) – organizations that campaign in favour or against political candidates – to raise money for financing the election process. In the veil of being non governmental organisations, the so called PACs have been known to generally redirect money obtained for electioneering to specific political lobbying and political purposes. However, now a new kind of PAC – called the ‘Super PAC’ – has come into existence. These infamous Super PACs gained legal backing and dubious prominence after two court judgments in 2010; the first by the US Supreme Court and the second by Federal Court of Appeals for the D.C. Circuit. Post these judgments, a Super PAC is allowed to be the recipient of an unlimited sum of money from individuals, corporations, or unions and further can keep their names anonymous – provided the Super PAC remains independent and away from the direct control of any political party/candidate it is supporting! As is quite evident, the latter part of the ‘direct control’ requirement can be quite easily fudged over, thus ensuring that the Super PAC model has given the perfect opportunity for political parties and candidates to sidestep the existing campaign finance rule, which enforces that no individual can give more than $2,500 to candidates during the nomination race and another $2,500 during the actual elections. Apparently, contributions to Super PACs can be unlimited (as they’re ostensibly ‘independent’ of the candidates). Even though officially the Super PACs seem to be independent bodies with no connections to respective candidates and political parties, it’s anybody’s guess that no sensible and wealthy American would leave out on an opportunity to gain the most out of this system. Also, needless to say, many of these Super PACs are in reality run by the candidates’ own acquaintances and former associates! Read More....

With state elections gaining heat, the farmer community of India would again, suddenly find themselves in the thick of all attention.This pocket of population that is usually sidelined, would again find themselves at the top of all political manifestos. And why not! When farmers constitute 60 per cent of the entire population, no political party can ignore this huge vote bank. And ironically, in spite of their seasonal electoral importance, the very same people are left in the lurch post the elections. Today, this one sector employs almost 60 per cent of the entire population, yet contributes merely 17 per cent to our national income! Shamelessly, our successive governments have succeeded in keeping a majority of them marginalised, bereft of even basic amenities, which are required for day-to-day sustenance.

The fact is that till date, our agriculture sector has hardly seen any major technological breakthrough. We are still stuck in an era from where we started. A stroll through any of our villages would be enough to visualise the archaic method of agriculture that’s still being practised throughout India - as even today, cattle is mostly used to plough fields, thus reducing the per hectare productivity. Our irrigation facilities still need so much upgradation that even today we are dependent on a good rain for a good produce. A Food Agriculture Organisation (FAO) report reveals that India’s yield of rice in the period 2003-2005 was 3,034 kilograms per hectare. This is nothing when compared to China’s, which produced more than double the yield of India with 6,233 kilograms per hectare, during the same period. The same trend was seen in the productivity of other crops like wheat (India’s production being 2,688 kg/hectare while for China it was 4,155 kg/hectare) and mustard (India’s average productivity was 909 kg/hectares which was a little less than half of China’s 1,778 kg/hectare) too! In 2004, China’s aggregate rice production was 186 million tonnes – way ahead of India’s 124 million tonnes. That’s not all. In 2009, in the international market, the per-hectare crop-produce value per for India was $914, compared to China’s $2780 and Korea’s $3530. In other words, the per hectare value of crops from Korea was around 4 times that of those from India. Similarly, China was 3 times ahead of India on the same parameter.

In 2008, China employed 39.6 per cent of its people in agriculture, a fall from 40.8 per cent in the previous year. On the contrary, in India, agriculture and its allied sector have been responsible for 60 per cent of the country’s employment, even though the sector contributes only 17 per cent to its GDP. It has always been observed that conventionally, over time, nations take a natural course in their path of development – a shift of employment concentration occurs from the agriculture sector to manufacturing and finally to the tertiary sector. In this context, even though India is lagging behind China (China has a lower proportion of its work force employed in agriculture), both are almost in a similar platform. But South Korea is in a different league altogether! It employs only 7.2 per cent of its total workforce in agriculture. This is due to South Korea’s committed adherence to incredible growth and its integration with hi-tech Western economies and scientific methods since 1960s!

In spite of the humongous population involved in agriculture in India, the value addition per farmer has always been an issue of concern. As known to all, our agriculture sector suffers from huge disguised employment and wastage of manpower. A quick analysis of World Bank data (May 2011) would be sufficient to comprehend the sheer waste of manpower. An Indian agricultural worker added $400 to the sector back in 1994 which increased to $500 by the end of 2009 – an increase by just 25 per cent point. In the same period, China increased their per worker contribution to the sector by 85 per cent; currently, a single Chinese agricultural worker adds $550 to the sector. However, it is Korea that has left all these nations behind, even before the race literally started.

Korea, unlike India and China, does not enjoy a burgeoning demographic dividend nor does it enjoy a vast land area. But this is one of those nations which despite all shortcomings have successfully created high labour productivity. Back in 1994, the value added per agricultural worker in Korea was around $7000, which is now on the verge of touching $20,000 – an increase of 185 per cent! And this despite the fact that India has 158 million hectares of arable land (53.11 per cent of total land area) compared to China’s 110 million hectares of arable land (12 per cent of total land area) and Korea’s 1.60 million hectares of arable land (16 per cent of total land), which talks volumes about the productivity and land usage of these nations.

This huge productivity coupled with extensive modern techniques of agriculture allowed Korea to maintain an undernutrition level that is a dream for many developed nations – an undernutrition level of zero per cent. Even China successfully decreased their under nutrition prevalence level from 18 per cent (in 1990-92) to 10 per cent by the end of 2007. Nowhere close to world leaders, India had an undernutrition prevalence rate of 20 per cent in 1990-92; this shamelessly increased by 1 per cent by the end 2005-07. Of course, this should not come as surprise, especially in the light of scams that are surfacing every now and then. What else can we expect from successive governments that have successfully made new records in allowing grains to rot in godowns, promoted and facilitated hoardings, sold onions at metaphorically gold-like prices, and above all, created situations where farmers had to commit suicide! What else can you expect when the interest on a loan for a tractor is more than that on a luxury car – or for that matter when a farmer has to pay a higher interest rate on agricultural loan compared to the loan meant for conspicuous consumer durables! This not only creates a dearth of capital at the farmer’s end but also keeps him alien to modern tools and scientific methods – thus lowering both per capita labour productivity and per hectare agricultural output!

What more, even the food supply per capita per day in India has been dismal. Our food supply today is merely 2333 kcal per person per day (an increase by 8 kcal per person per day since 1992) compared to 2947 kcal of China (increased by almost 400 kcal in 1992) and 3104 kcal per person per day of Korea (increased from 3003 kcal per person per day). In simple words, India has failed in a big way to address both the problems of undernutrition and food supply, thus pushing millions towards death. Read More....

The recent case of Indian traders being kidnapped in China has opened up a can of worms. Apart from the case revealing weaknesses in the Chinese judiciary (as I had highlighted in an editorial a few weeks back), it has also brought out in the open something that traders from India (and other countries) were facing for a long time but not speaking about openly. The big trade that happens between India and China is through the scores of wholesalers operating out of wholesale markets in India like the Sadar Bazaar in Delhi. These are not the big guys who prefer getting into litigation that easily; they also aren’t amongst those who operate with lawyers and bigger paraphernalia. These are smaller traders, though huge in numbers, who go to Chinese towns like Yiwu in particular and pick one or two containers of goods worth Rs. 30 lakh to a crore once every quarter. And they now fear entering China. The question is why? Can one incident of kidnapping shake up an entire community of traders, especially when China is such a good bargain for them? Or was this not that stray an incident after all?

Consider the case of Manish Rewari. He has been doing business in exactly the same town of China for years now. And swears by the advantages that China gives him in his business as he shows off a fascinating watch that he is wearing while narrating his story! He had first seen the same watch in a wholesale outlet in Karol Bagh (a shoppers’ paradise near Central Delhi). The shopkeeper quoted Rs.22k as the best price for the watch to Manish. Not be outdone like normal customers, this China believer – in his next trip to Yiwu – went around various shops and found out exactly the same watch. And the price for a single piece was Rs.2.5k; and for bulk order of more than a hundred pieces, Rs.1.2k per piece. A watch enthusiast, he picked up only one watch for his consumption.

If that sounded nice, just a trip before this particular trip, Manish’s experience was not as good. He used to work with a Chinese agent then. During his previous trip, he had struck a small deal and purchased goods for Rs.75k through the said agent. The agent took the money, delivered him the goods, but never paid the original seller. The next time, when Manish came and tried to directly deal with the seller, the moment he provided his old receipt with the previous agent’s name to show the price at which he had bought the goods in the previous trip, the seller pounced upon him. His grudge was that he had not received the money for that particular transaction. Manish very courageously tried to defend himself by saying, truthfully, that he had obviously paid up for the same. This he did despite knowing “that they [the Chinese seller] could pick him up and make him disappear”. His reasoning clearly was of no help because soon, there were scores of the seller’s people and henchmen who came from all around and surrounded Manish. Sensing trouble, Manish approached the nearby police, who in their very usual unfriendly manner told him in Chinese that they were there to protect only the interest of the Chinese. That’s when good sense prevailed. Manish knew that he had come for just three days and had a lot of deals to strike. And this would only get messy. And spending a few days in jail like a few others he had heard of was not a great idea. Manish grudgingly agreed to strike a deal with the disgruntled seller, and paid fifty percent of the pending money again as settlement (since it was too small an amount) and fortunately got away.

This year, however, Manish is not ready to go to China anymore; well, almost. He now works through an Indian agent. The recession hasn’t been great for businesses and he fears that even the Indian agent might not have paid up properly to the Chinese sellers (though Manish has paid his entire pending Rs. 37 lakh for his last imported container). The fear is that the Chinese sellers might again pounce on him. “It’s undoubtedly a fearful situation. The question of safety for the foreign trading community is totally missing despite us being such regulars and buying so much from them. There is no helpline. And they are just not ready to listen to our version. Someone messes up and someone else pays for it. The recent kidnapping has only brought to highlight the fears and trauma people have been going through for a long time despite doing big business there,” he says, elaborating further. He says something more that has been haunting a lot of Indian professionals in Gurgaon of late, due to a new phenomenon I had outlined, again in a previous article of mine, on how Chinese companies are now doing business in India only when they are allowed to get Chinese workers here (in effect, easing out their employment problem through projects in India).

The grudge the people working in Gurgaon have – as they see scores of Chinese people all around them working on various projects – is that not only are we allowing Chinese people to take our jobs, we’re also accepting their behaviour to simply look down upon Indians despite working in India itself (rightly or wrongly, is another question of course). Manish says exactly the same, “We do so much trade in China but they just don’t treat us with enough respect and that is a key reason behind this high handed semi mafia behavior.” Read More....

Ever since the American economy went bust and the European economy has been going down, it’s sad to see my favorite magazine, The Economist, frantically trying to defend the wrong and go wrong by criticising the right. Time and again. Just a handful of weeks ago, in their frantic effort to criticize everything Chinese and everything non-market oriented, The Economist did a cover story called The Rise of State Capitalism (January 21-27, 2012). Basically, the story talked about how economies like China and even India are becoming more dependent on large public sector units and how this is bad blah blah. The obvious supposed scare is that public sector corporations are inefficient, have time overruns, invariably have cost overruns, have ingrained corruption and so on! The real scare is the growing might of China, of course!

Our group is into almost all kinds of consulting activities and we rarely come across a private sector company where an executive doesn’t ask for a bribe before awarding a big contract. Sometimes we’ve even found out that a competing firm has used sleaze to satisfy the client being prospected and thus has obtained the deal. From Enron to Olympus to Accenture, there is no dearth of large corporations which have made the most corrupt of choices. Large companies – whether public or private – always have within them certain ingrained issues. And what differentiates them from one another are systems and leadership. Under a different leader, the same GE could be the world’s best benchmark example while under another, in just a matter of a few years, it could be a struggling joke! The same it is with the public sector. If systems are put in place like the private sector, there is no innate reason why public sector corporations should be inefficient. And if systems go wrong, then you could even have a Reliance being rated worse than a public sector company to deal with.

As a management teacher, at least that’s what I have believed. That the former USSR failed or that China is nondemocratic doesn’t mean that the public sector idea is wrong. The only truth is that governments must know what to plan and what not to. A government, for example, has no business being in the luxury hotels sector; at the same time, in countries like India, the government not being in health or education is a crime. There are wonderful examples of public sector successes and one of them is the Delhi Metro Rail Corporation (DMRC)! It’s a case study of our times.

In the midst of times where corruption was the high point and scams were unearthed left, right and centre, in the midst of the massive CWG scam, here was a corporation in the same government sector, under the control of similar ministers and bureaucracy and in the same country, with a key role during the same Commonwealth Games. And yet, the legacy of DMRC has been diametrically opposite and mind blowing! For records, the Delhi Metro has almost always completed projects before time. In fact, the first phase of the DMRC project was completed in seven years instead of the planned ten years. DMRC has had absolutely no cost overruns. Its efficiency is beyond any kind of international comparison with the trains being on time 99.97% of time! That too with a very strict guideline of one minute deviation as the standard of excellence – while internationally, in most countries, they term a 3 min deviation from scheduled time as on time! By all international standards, the Delhi Metro is world class and it was competed in the second shortest time in the history of the world as far as metro constructions go! And finally, to top it all, it has had no instance of corruption and it is as massive a corporation as it gets!

So what made the difference? Meet the man who was at the helm of it all Mr. E. Sreedharan and you will know! I have a theory – the corruption index of a man is always on his facial muscles. It’s not about being traditionally good looking or bad. It’s about the reflection of your thoughts on your face. The man who spends his life asking for bribes has a dirty bribe-seeker look on his face along with the look of someone who has an inner fear of doing wrong and getting caught. A reason why all the professors in our institute look distinctly different from the majority of the politicians in our country! Yes, E. Sreedharan looks like the former ones, my professors who taught me! Clean, honest and sincere! And when he speaks, he exudes integrity – growingly the rarest virtue!

“Four simple principles,” is how he explains his success story! The key to DMRCs success has been integrity! Yes, that’s what Sreedharan looked for first in his people! He wanted a free hand in selecting people and consequently got his old work acquaintances and others who were known to be totally clean to work with him; yet, he fired them at the first instance of an attempt to be corrupt! Integrity was his absolute top priority. It was followed by something that is interestingly massively linked to integrity! Professional excellence! The rule is simple. If you are talented, you are in a better position to not just deliver high quality results on time but also be more ethical. Those are the non-talented guys who retain their place mostly through corrupt practices! So within DMRC, Sreedharan had no place for the less talented! The focus on efficiency was so much that he did away with clerical staff! Today’s offices required no clerks; in fact, that’s from where the delays and corruption start! With these two key principles in place, the job was more or less done! Read More....

Amongst the many critical predicaments that the Indian economy suffers from, corruption has been one of the biggest monsters, and thankfully the most talked about in recent days. Needless to say, corruption has corroded every delivery system and has made it completely dysfunctional. The entire Indian public life is riddled with overriding rates of corruption – from the Adarsh land scam to Commonwealth Games misappropriations to the 2G spectrum scam – the list here has been endless, and the magnitude, obscene. In fact, India’s public life was never clean – the infamous Bofors scandal, Harshad Mehta’s nexus with senior politicians and Ketan Parekh’s stock market manipulation – all had their own perilous impact on the economy! It requires no empirical study or statistical survey to exhibit that we comfortably are the top performers in all corruption related global indices.

Take for instance, Transparency International’s Corruption Perception Index (CPI) where India’s rank has been slipping consistently – languishing at the 95th position now with a score of 3.1 (on a scale of 10), a sizable 23 ranks down from 2007! We are far behind China that stands at 75th position with a score of 3.6. CPI score is not only about corruption but is more about the way corruption has got institutionalised in our system. Also, it is a fact that India’s score could have been better had it not been battered with the monstrous 2G spectrum scam. Interestingly, all the least corrupt countries like New Zealand, Denmark and Finland with 9.5, 9.4, and 9.4 scores respectively are not just socially developed but also economically progressive. And that’s why these are those nations that experience very few cases of crime, corruption and other forms of social malaise – unlike India.

The thumb-rule that set the pattern is that the developed countries mostly have high CPI scores, whereas at the bottom of the table are the countries mired by civil strife and oppressive regimes; and in-between are the emerging economies as well as former communist blocks. There is also a direct correlation between CPI rankings and Human Development Index (barring some aberration like Greece, which, in spite of being a developed country is ranked below China at number 80; and South Korea, which is ranked 12th in HDI and is 43 in CPI). Most of the African as well as Asian nations have a combination of low CPI and low HDI scores and most of the European and North American countries have the opposite; thus reflecting a direct bearing between the two indices! On hindsight, it may appear that there is no impact of corruption on GDP growth and investments. China and India, both scored quite low on CPI, yet have been riding on decent economic growth and FDI inflow. Vietnam and Indonesia are even lower in ranks in CPI (2.9 and 3.0 respectively) are recipient of quantum investments with their economy kicking!

Another case in point of disconnect between GDP growth and corruption is Brazil with a score of 3.8 and Russia appallingly with 2.4, who are at the bottom half of the draw! However, there is an interesting catch here, particularly, with respect to India. We have an increasing income inequality with a dubious distinction of possessing the highest number of poor in the world. An OECD report reveals that the people belonging to the top 10 per cent of our income group are 12 times richer than the bottom 10 per cent. And this is increasing as the difference 20 years ago was only 6 times, that is, before the beginning of our magic potion of liberalization! Gini Coefficient another notable measure to evaluate inequality, is on a rise too – it has increased from 0.32 in 2000 to more than 0.37 now! There is no secret in the fact that the income inequality assuages the chances of employment to many, lowers purchasing power for consumption expenditure, halts the access to borrowing, and hinders the ability to save and invest! For the uninitiated, CPI also takes into account various parameters that have a higher social impact. India fares badly on almost all parameters considered under CPI – viz. bribery, extortion, nepotism, patronage, graft, embezzlement. The 2G spectrum scam, CWG scandal, cash-for-vote bribery case have set infamous benchmarks on all these parameters and surely are the reasons for such poor showing in the index.

More alarmingly, as India develops, there is an ascent of illicit money being stashed in foreign shores as well. There is no doubt that due to this corruption plaguing India, the fruits of development are certainly not reaching the desperately poorer sections of the society – a fact quite evident from the increasing gap between the rich and the poor. World Bank too has drawn a poor picture of India’s achievements in curbing corruption! The report is one on Governance Indicators, where India has fared quite poorly and is below the half level on most parameters. In the parameter ‘Rule of Law and Control of Corruption’, which directly addresses corruption related issues like crime, tax evasion, black markets, and judicial independence – India has scored a lowly 56th percentile! That said, India’s low score is quite expected and obvious on this particular scale. India is probably the worst performer globally with respect to tax evasion as a humungous amount of black money gets stashed abroad (we top the global list with more than $1 trillion of Indian black money floating around the world). Added to that, the efficacy of the Indian judiciary has been in question too as even such a corrupt nation like ours can still hardly boast of any political or business leader who has ever been sentenced to long years of imprisonment.

Shamelessly, leaders like Kanimozhi and many others who were arrested on corruption charges are now roaming scot free. And a few who are still behind bars are leading a luxurious life inside the prison with all luxuries at their disposal. This speaks volumes on the credibility of the so-called ‘Rule of Law’. Such lousy rules of law are the vital motivating factors for our political and business class to adhere to such corrupt practices.

Another research and advocacy organization, the Global Financial Integrity (GFI), released a report called ‘The Drivers and Dynamics of Illicit Financial Flows from India: 1948-2008’. The report alluded to some jaw dropping facts! As a direct result of black money stashed abroad, India has lost a humungous sum. Tax evasion, bribery and kickbacks, cases of crime and other forms of corruption – all are listed between 1948 and 2008! The 2G spectrum is a classic case of a royal kickback scam by A Raja and it is intriguing how our system managed it to keep it off-the-hook, more so as this was done during the Bofors era. Notwithstanding, in our gigantic corruption saga, the present valuation of this illegal capital flight is more than double the US external debt! Even at the corporate level, the private sector always preferred overseas financial centers – the share of which (in terms of deposits), went up from 36.4 per cent in 1995 to 54.2 per cent in 2009.

Because India was positioned as a nation-state post Independence, corruption developed a strong foothold in Indian politics. Moreover, given the series of scams that have come to limelight in the last one year, it is tempting to assert that Indians are by nature immoral and are liable to be corrupted easily. However, researches have shown that Indians are as prone to become corrupt as their peers in other developing nations of Asia. But one thing that sets Indians apart is their willingness to tolerate such corrupt measures. This is evident from the amount of bribes the common man in India pays for availing of even the basic services in his day to day life. From getting a service in the hospital to lodging an FIR or getting a driving license, every service requires a common man to pay bribe for getting the work done without much bureaucracy. Almost all the public services like the Public Distribution System (PDS), hospitals, schools, water supply, are corrupt from head to toe. As per the India Corruption Study 2010 by CMS, rural households of 12 surveyed states have paid an amount close to Rs 4700 million as bribes during the last one year. Critically, the most affected people by these corrupt practices in public services are those from socio-economically weaker sections of the society, particularly in rural areas. Read More....

This editorial comes at this crucial juncture when the ruling government and the opposition (that includes some Congress allies in the government too) have locked horns over the entry of foreign private players in the retail segment. The debate was imperative as the retail industry has always been considered as the nervous system of any nation, and this industry has in most of the cases even helped nations revive themselves during bad times. So it was interesting to evaluate the entire debate from an analytical dimension as well. Currently, the organized retail in India is only 2 per cent of the retail industry; clearly, a huge opportunity is waiting to be unleashed. The opportunity can be gauged from the fact that the American organized retail market is 80 per cent of the overall retail market, Thailand is at 40 per cent and China at 20 per cent! If on one hand organised retail is a global reality, then on the other, the Indian middle class has the given power to splurge, making the proposition viable. Then why is there a protest? The fact is that the ongoing nationwide protests against foreign entry in retail are a bit too late, too baseless and based more on a campaign by emotionally charged political parties which lack pragmatism. After allowing FDI everywhere else, why at all these recent dramatics against retail? Every government in the past has made deals and allowed FDI to enter systematically into India without a plan in place to make Indian firms competitive beforehand. We systematically ruined Indian competitiveness; yet, now for publicity, are creating a hullaballoo against the opening up of retail. The fact is, FDI in retail is inevitable. And not that there are no benefits.

If things go right, then the entry of foreign firms in the long run should benefit the overall economy by subsuming farmers, producers of finished goods, creating mass scale employment, increasing government revenue and hopefully cleansing the muck that lies in our storage and distribution. If all falls into place, then organized retail market is then expected to reach approximately $260 billion by 2020. It would augment income levels of all stakeholders to the tune of $35-45 billion a year, new employment generation to the tune of 3-4 million directly and 4-6 million indirectly. With foreign multinationals setting up shop across the country, the government exchequer would likely bloat up by $25-30 billion per year. The Small and Medium Enterprises (SMEs) are likely to prosper too and learn the concepts of enhanced production, higher productivity, assured supply, quick payment and better quality. It will further boost the organized sector growth – a sector that is already growing at an impressive 24 per cent in the last 3 years. The retail sector would also increase the farmers’ income – who at the current stage are on the threshold of marginal living at best or on the verge of committing suicides at the worst. So, of course, it is inevitable for India to allow FDI in retail and the writing on the wall is also very clear. But amongst all this, almost everyone is missing out one moot question, which is fundamental to the success of the Indian retail story.

Amongst other clauses that the government has put, one interesting clause is that these large retailers have to essentially source their supplies from the small and medium enterprises to the tune of 30 percent. But then, this is a universal clause and does not essentially mean that it is the Indian SME segment that is going to benefit from the same. And this is where we have our biggest threat. The question is: would Indians take pride to pick up Indian brands from these stores? The bigger question is: do we have enough Indian brands which can stock the shelves of these monstrous giant outlets? In fact the entire debate of organized retail short-changing the farmers and producers is all baseless, simply because retail survives finally on what sells. And if Indian producers and manufacturers are able to produce brands which are in demand, then they definitely would get shelf space. It is no secret that more than 60 per cent of what Walmart sells in the US is sourced from China. The same holds true for the Tescos and the Carrefours of the world.

The British always prefer home-grown apples over imported ones, especially the Cox variety; and thus the retailers are seen selling the domestic varieties more than the imported varieties. In order to avoid mass resistance, it is general practice that many luxury brands take their goods for finishing to their home nation and then tag the product as a domestic output. In this light, a survey by Harrison Group showed that around 65 per cent of rich American consumers buy ‘domestically made’ products whenever possible. Japanese too prefer the products to be finally processed at local units than to be imported finished goods. This is true for most of the east-Asian nations. To some extent, American companies such as GM and Chrysler were bailed out because they represented Americanism – evident from the way these are used in American movies – of course, apart from other economic reasons. As recent as in August 2011, the South Korean tobacco association campaigned against Japanese products; and in October, Iranian Ayatollah Ali Khamenei asked the government to purchase only domestically produced goods and requested the President to ban foreign items in the nation if the same were being produced by local companies.

In fact, with respect to national pride, the best case in point is South Korea. It’s perhaps the country I appreciate the most throughout the world; more than China, more than Japan.When compared to India, it is a dot of a nation, but thanks to their sense of national pride, they have made unprecedented strides in all sectors. South Korean schools promote usage of local-brand purchases among students and a criticism to this is perceived as criticism to the nation. In spite of worldwide success, Nokia and Blackberry are still not able to gain substantial market-share in South Korea and Samsung Electronics dominates the market with over 48 per cent market share. In fact, the Republic of Samsung (as it is popularly called) touches almost every aspect of life in South Korea. Google has merely 20 per cent market share in South Korea while domestic search engines namely Naver and Daum dominate 90 per cent market share. In automobiles, the top car brands are either from Kia or Hyundai or SsangYong, which out-compete the BMWs and Mercs of the world. On the roads of Seoul, spotting an American or a Japanese car is a total rarity – and I am saying this from the personal experience of trying to estimate the ratio! It’s not that the Korean cars look bad or are of bad quality. They look stunning and each one is better than the other. So the fact is that consumers don’t buy their national products by sacrificing quality. The government policies were such that the local manufacturers were given all the support and a very competitive environment to improve quality by competing locally – unlike in India where we opened up our markets like cheats allowing the legacy Ambassadors to compete against the snazzy then post-modern Hondas. It was similar to allowing players to compete in the Olympics without having held good quality national games to nurture talent. Read More....

When I went to China a decade back, what I saw hit me very hard. I felt that if all of us in Delhi were to work 24x7 for 25 years, it would still be tough to convert Delhi into Beijing. That’s the China I was expecting to see when I went there again last month. What I saw instead was an extra 25 years of growth in the last 10 years!!! If ten years back, there were gigantic roads but less cars, this time the roads were filled with American cars; brands which American companies haven’t even cared to launch in India! If the last time I saw high-rise buildings, then this time I saw ten times more of them! If the last time I was amazed with Beijing, then this time I realized that we couldn’t even become Guangzhou if we worked 24x7 for the next 50 years. I believe that every Indian politician must have a visit to China as a mandatory part of his induction process into the Parliament (especially the Communists of India who have also so shamefully cheated their respective states year after year), so that they are firstly aware of how they and their predecessors have cheated this country and secondly to know where a country can reach in no time!

They say now that the Chinese economy has caught up with the American economy. In our book The Great Indian Dream, we had written ten years back about the same concept; and today I write that the Chinese economy has left the American economy far behind. Their products are so undervalued that no kind of calculation can show the real value of their humongous economy! And come to think of it, even a few decades back, China was seen with lot of scepticism owing to their political structure and a gargantuan population which was increasing by the day! But when we look at the nation today we realize that it took China just a few years’ time to give this huge population a purchasing power and lifestyle that even many in the West are deprived of and to create an unfathomable miracle! What China did and is doing now is beyond the imagination of many nations; they created this gigantic economy by systematically planning at every micro level – and most importantly, taking its citizen along this growth path! Today, an average Chinese living in Beijing, or Shanghai is almost as well off as an average American living in New York or an average British living in London! So what exactly did China do?

Amongst a host of other things, China’s opening up of its Iron Curtain and freeing its economy from the shackles of central control in the late 1970s while still retaining its commitment to the poor literally brought about the miracle. Unlike in India, their very carefully planned liberalization allowed the nation to experience rapid strides in growth and above all lifted more than 500 million people out of poverty! Millions of peasants were granted freedom from the massive poverty by being allowed to follow their dreams. This freedom and shackle-free life led to rapid development in the� manufacturing and service sectors in the last 20 years! All this came as a celebration of new hope for Chinese masses and a new beginning of entrepreneurial freedom! The new spirit and the new mission were well supported by increasing investments in infrastructure, education and various other social sectors that symbolized the Chinese rise in world forums and made China one of the most sought-after investment destinations. The freedom from poverty in turn also helped develop the agricultural sector – as the policy of ‘farmers can make their own economic decision’ led to millions of farmers’ poverty cycle being alleviated! The rural household income doubled from 343.4 RMB ($55) in 1978 to 735.7 RMB in 2003. Between 1990 and 2005 the average per capita growth of Chinese economy was a staggering 8.7 per cent (highest among major economies)! The World Bank’s stipulated poverty line of $1 a day in Purchasing Power Parity corresponds to around 2,836 RMB per year (as per 2007 estimate)! As per this definition, China’s proportion of population below poverty line was 64 per cent in 1981; this dropped to an unbelievable 10 per cent by 2004 (India still has more than 40% of its population languishing below the poverty line as per purchasing power parity)! That’s Chinese poverty eradication – an exemplary and remarkable performance which is often quoted as a miracle – and an inspiration and case study for all developing countries across the globe.

The poverty alleviation programs undertaken by the authorities in the last three decades have contoured the modern China that is sparkling with confidence. Today, every Chinese is free to travel to any city to try and make a living there (Of course, cities do have resident permits; holders of such permits get subsidies in health facilities etc). Yet, one cannot find a single, real, poor person in the cities. No beggars, no slums and nobody sleeping on the streets! When poor can migrate freely, cities are bound to have slums if real poverty exists. In China, people come to cities for a better life and not because they were dying in the villages. The programs for poverty alleviation in China are carried out in 592 key counties over and above 74 counties in Tibet. In the distribution of prosperity, the Central and Western counties were the weakest links always. To address the economic gap, the central authorities from 1986 issued subsidized loans to the poor people – that was augmented from 1.05 billion RMB in 1986 to 5.5 billion RMB in 1996! Similarly, the “Food for Work” scheme was another flagship program in China where government spent 33.6 billion RMB between 1986 and 1997. Unlike other parts of the world where most of such programs are littered with corruption, the Chinese were successful in creating productive assets like roads, bridges, dams and other infrastructures across the nation. In the agricultural sector, reforms in agricultural taxes and other fees were implemented to relieve the farmers. In 2000, all the fees were abolished and replaced with a single slab agricultural tax – and later on in March 2004, amidst fear of WTO repercussions, the central government decided to eliminate the agricultural tax completely within the next 5 years. In the same year, more agricultural subsidies were introduced, which was followed by increased spending on rural infrastructure amounting to $25 billion! Read More....